Resolution Trust Corporation:

Timelier Action Needed to Locate Missing Asset Files

GGD-93-76: Published: Apr 28, 1993. Publicly Released: Apr 28, 1993.

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GAO reviewed how well the Resolution Trust Corporation (RTC) managed asset file transfers to standard asset management and disposition agreement (SAMDA) contractors, focusing on whether: (1) contractors received asset files in a timely manner; (2) RTC withdrew loans with missing files in a timely manner; and (3) RTC followed procedures for controlling asset file transfers.

GAO found that: (1) as of August 1992, SAMDA contractors have disposed of more than 11,600 nonperforming loans; (2) contractors are to receive asset files when contracts with RTC are signed, but contractors have not received asset files in a timely manner; (3) SAMDA contractors are required to obtain RTC approval for each asset's management and disposition plan within 90 days from contract signing, but they cannot develop the required plans or dispose of loans without RTC asset files; (4) RTC has no policy to determine when to withdraw loans from contractors' portfolios; (5) while contractors waited to receive missing asset files, they continued to receive management fees for the loans; (6) RTC officials do not always notify records managers before shipping asset files; and (7) asset files are critical to the management and disposition of loans and RTC needs to effectively manage the transfer of asset files to SAMDA contractors.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: RTC requested a legal opinion from its legal division on this issue. Its decision was that cases where no asset files existed or where asset files could not be located within a reasonable time should be addressed on a case-by-case basis. RTC did not provide plans or a schedule for making the case-by-case review to implement the recommendation and provided no indication that it would undertake the necessary case-by-case reviews. As of August 19, 1994, RTC had not scheduled case-by-case reviews. RTC officials told GAO that some reviews were done at some locations, but could not provide GAO with information on the number of reviews done, the locations where they were done, or the results of any such reviews. Because it does not appear that RTC will take further steps in implementing this recommendation during the final 15 months of its existence, GAO is closing the recommendation at this time.

    Recommendation: To stop the extended payment of asset management fees to SAMDA contractors on current contracts for loans with missing files currently assigned, the RTC President and Chief Executive Officer should determine whether the missing asset files for loan portfolios assets assigned to SAMDA contractors can be located within a reasonable time and, if they cannot, withdraw or replace the loans.

    Agency Affected: Resolution Trust Corporation

  2. Status: Closed - Implemented

    Comments: On July 16, 1993, RTC revised its directive on management of asset files to more strongly emphasize the importance of file management and the recordation of file transfers.

    Recommendation: To preclude further problems with asset file transfers, the RTC President and Chief Executive Officer should reiterate the importance of notifying records managers of all file transfers as required by corporate policy and enforce compliance with the notification requirement. In addressing the problem, the President and Chief Executive Officer should also consider the various field office initiatives underway and, if appropriate, implement one or more of them nationwide.

    Agency Affected: Resolution Trust Corporation

  3. Status: Closed - Implemented

    Comments: On August 19, 1994, RTC advised GAO that it had developed an amendment for SAMDA/SAMA contracts that placed the discovery and notice responsibility on the contractor. The amendment states that the contractor will determine within 45 days after an asset is assigned to a contractor whether: (1) the files for the asset have been provided by RTC; (2) the files are complete enough to perform the services required; (3) the asset is being managed under a different agreement or contract with RTC; (4) the asset has been placed in a RTC sales event; (5) RTC has disposed of or sold its interest in the asset; and (6) the services required will be of little or no value to RTC. After making the determination, the contractor is to notify RTC in writing on those assets where files are not available and where any services required would be of little or no value to RTC. Unless notified in writing by RTC, the assets identified will no longer be subject to the agreement.

    Recommendation: To preclude the payment of management fees for extended periods on future contracts when asset files cannot be provided to the asset manager or other contractor, the RTC President and Chief Executive Officer should establish time frames for reviewing whether missing asset files can be located and whether the related assets should be withdrawn from contractors' portfolios.

    Agency Affected: Resolution Trust Corporation

  4. Status: Closed - Implemented

    Comments: A new directive covering records management activities during conservatorship and receivership has been issued. This directive provides more formal procedures for inventorying asset files in conservatorships and receiverships and coordinating the effective and efficient transfer of asset files from these units to asset management contractors. A designated records coordinator will work with Field Office Records Management to ensure among other things that all records, including all asset files, are properly inventoried at the document level prior to assignment to asset management contractors.

    Recommendation: To preclude the payment of management fees for extended periods on future contracts when asset files cannot be provided to the asset manager or other contractor, the RTC President and Chief Executive Officer should ensure that effective asset file transfer procedures are in place and are followed.

    Agency Affected: Resolution Trust Corporation

 

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